Xin Changxing, left, secretary of the Jiangsu provincial committee of the Communist Party of China, shakes hands with Prime Minister Han Duck-soo at the Government Complex Seoul, Thursday, amid a rise in visits from Chinese local government offcials to Korea. Yonhap
Chinese local governments have recently ramped up their visits to Korea in an effort to bolster economic ties and attract foreign investment, business insiders said.
This surge, especially evident since March following the announcement of the Korea-China-Japan leaders' summit in May, indicates the strategic moves by China's local governments as local growth there is mired in heavy debts and post-pandemic economic slowdowns.
The latest visit saw Xin Changxing, secretary of the Jiangsu provincial committee of the Communist Party of China, meeting with officials in Seoul last week, including Prime Minister Han Duck-soo and Seoul Mayor Oh Se-hoon, to discuss promoting intercity exchange and cooperation.
The dialogues are crucial in terms of resuming contact, but Chinese governments need to show more concrete efforts to woo increasingly cautious Korean investors, according to Federation of Korea-China Chairman Park Seung-chan.
"Officials often come and say that China has opened up much more deeply, that they have all the hard powers and the general incentives, but they are not addressing the most important concerns," Park, who is also a professor at Yong In University, said.
Park was a former adviser for the Korea Trade-Investment Promotion Agency on the China-Korea free trade agreement (FTA).
"If a company is to invest or set up factories in a Chinese city, how would local authorities help connect and align resources? Would they help come up with an incubation plan? How would the government help the business grow? What kind of supporting assistance would be provided?" he said.
"These detailed implementation measures are lacking."
According to Park and others familiar with the matter, an average of eight to 10 delegations from Chinese provinces have visited Korea each month since the news broke in March about the resumption of the Korea-China-Japan trilateral summit, up from three to four visits from Chinese localities monthly at the beginning of 2023, shortly after China reopened its border.
These delegations, formed by provincial and city-level authorities from Guangdong, Jiangsu, Shandong and Hainan, among others, which have close economic ties with Korea, attended business forums and investment meetings, aiming to rejuvenate local economies and attract international collaboration.
From May 29 to 31, China's Hainan Province Governor Liu Xiaoming also visited Korea at the invitation of Jeju Governor Oh Young-hun, meeting with key officials and business leaders, attending the 19th Jeju Forum and the Seoul Hainan Free Trade Port Promotion Conference.
Gyeonggi Province Governor Kim Dong-yeon, right, and Xin Changxing, secretary of the Jiangsu provincial committee of the Communist Party of China, sign a sister province agreement at Dodamso, the former's residence in Gyeonggi Province, Wednesday. Yonhap
The visits are part of a broader effort by local Chinese governments to attract foreign investment globally, addressing a key priority for Beijing. Policymakers in China are increasingly concerned about the sharp decline in foreign investments in recent years, driven by growing decoupling trends between China and the West.
President Yoon Suk Yeol, China's Premier Li Qiang and Prime Minister Fumio Kishida of Japan held three-way talks on May 26 for the first time in four and half years, seeking to revive economic ties amid geopolitical tensions and resume FTA negotiations.
China's allure as a prime investment destination has significantly waned in recent years for Korean investors, due to geopolitical tensions, stringent regulatory environments and the economic impact of the COVID-19 pandemic.
Last year, Korea's direct investment in China plunged by 78.1 percent compared to the previous year, dropping to $1.87 billion, according to the Ministry of Economy and Finance.
China fell to Korea's seventh-largest investment destination in 2023, the first time it was out of the top five list since the two countries established diplomatic ties in 1992.
The decrease in investment is primarily influenced by geopolitical factors, including the competition between China and the United States and economic security concerns, said Zhang Huizhi, a professor of northeast Asian studies at Jilin University in China.
"Korean companies are heavily restricted by both the U.S. and Korean governments, which is forcing many to leave the Chinese market," she said.
"Additionally, some Korean companies were squeezed out of the Chinese market due to the intense competition from Chinese and foreign companies there, and they turned to Southeast Asia or other regions.
"However, many Korean enterprises investing in Southeast Asia are encountering numerous operational challenges. Despite the lower labor costs in Southeast Asia compared to China, other supply and production chain conditions are far less favorable, leading to an increase in overall production costs," Zhang said.
Trade relations between China and Korea soured significantly after the deployment of the Terminal High Altitude Area Defense missile defense system in 2016. In response to the deployment, China imposed various economic sanctions on Korean companies, leading to a sharp decline in Korean exports to China and a cooling of economic ties. The geopolitical tensions caused a ripple effect, impacting the two nations' tourism, retail and cultural exchanges.
President Yoon Suk Yeol shakes hands with Chinese Premier Li Qiang during the Korea-China-Japan trilateral summit, May 26, as the three countries worked to revive economic ties amid geopolitical tensions and resume free trade agreement negotiations. Yonhap
Park said the visits from Chinese officials serve as "reaching out a hand to the wounded hearts of the Korean businesses."
"The meetings and exchanges are an improvement from the separated state."
He added that the two countries have considerable potential for cooperation, as Korea's industry strengths, combined with China's capital and market advantages, create ample opportunities for strong partnerships.
"For instance, China holds a significant position in the biotechnology sector, providing a vast market and numerous resources," Park said.
"Korea, on the other hand, has its own strengths and a solid foundation in this field. By leveraging these complementary advantages, both countries can overcome their respective challenges and achieve greater success through collaboration."
As the U.S. adopts a coordinated approach to curbing China's access to advanced technologies under U.S. President Joe Biden, investing in China's semiconductor and other industries becomes very risky to Korean firms, said Xu Tianchen, senior China economist with The Economist Intelligence Unit (EIU).
"Going forward, geopolitics will continue to preclude foreign direct investment in advanced technologies, which sit in the crosshairs of U.S.-China tensions," he said.
"Meanwhile, the two countries can explore trade and investments in traditional industries such as food and papermaking, where geopolitical sensitivities are low."
Luna Sun is an economy reporter with the South China Morning Post. She is currently based in Seoul, reporting for both The Korea Times and the South China Morning Post via an exchange program.